Auditors Limited In Responding to Criminal Acts

Auditors sometimes find evidence of criminal or questionable acts in the course of their work. After a particular case, Arkansas lawmakers developed a memorandum of understanding (MOU) to keep state auditors from straying into criminal investigations, according to the Stephens Media Group.

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Faulkner County Prosecutor H.G. Foster told the Stephens Media Group, “We’ve been working fairly effectively together. All three of us have different specialties…and powers under the constitution.” Arkansas State Police Col. Steve Dozier said, “For years we have worked with some unwritten formal standards,” which cannot be said after the MOU was developed and accepted.

The case that initiated the MOU was an audit of the Arkansas Board of Architects. The Stephens Media Group reports about $105,000 in unauthorized travel expenses was found in the audit and the auditors questioned the executive director of the board directly. The director admitted to the misuse of funds and repaid the money before the case was turned over to the county prosecutor’s office. When lawmakers heard this sequence of events, they thought that the state auditors impeded any chances of prosecution.

The Los Angeles County Board of Supervisors has a similar written arrangement. Their policy manual reads, “The Board of Supervisors has designated the Sheriff, District Attorney and Auditor-Controller as the only County agencies with the authority to conduct criminal investigations. These agencies have agreed that in all instances when it is suspected that a County employee or an agency contracting with the County has committed a criminal activity, the Auditor-Controller’s Special Investigations Unit (SIU) is to be notified immediately. The SIU will contact the appropriate law enforcement agency if it is determined necessary. If applicable, the Auditor-Controller will report the investigation findings to the Board, the concerned department head and the Chief Administrative Officer.”

Putting a finer point on the need for these policies, the Los Angeles County Board of Supervisors policy finishes, “Also, no department is to conduct any internal investigation without first notifying the Auditor-Controller’s SIU. This ensures that only one department is investigating allegations of improprieties.”

The city of Kalamazoo, Michigan is very explicit in their policy as well. The City of Kalamazoo Policy Governing Fraud and Abuse states one purpose of the policy is “to establish a policy to govern the process to be followed by the Internal Audit Department and City Administration when responding to allegations of fraud and abuse in city programs, functions or activities. By having an established policy, the city is able to institutionalize the approach and reduce the role of personalities in decisions regarding each case.”

The Kalamazoo fraud and abuse policy further defines their reasoning. Another reason for having this policy is to “reduce confusion to assure that investigations are conducted by those with proper training, and to assure a complete professional investigation.” This also serves to “reduce the opportunity for compromising the investigation by alerting the suspected party (ies) or by mishandling” and to “reduce the opportunity for successful litigations by suspected party (ies).”

Whether in Kalamazoo, Los Angeles County or your own city, “any employee found to have committed a dishonest or fraudulent act in relation to … financial affairs is subject to disciplinary action … and investigation by law enforcement agencies when warranted,” according to the City of Kalamazoo Policy Governing Fraud and Abuse.